The New York State Senate passed legislation that will enhance NYDFS enforcement powers against unlicensed activity in the State.  Takeaways:

•   While there has been some argument over the powers of NYDFS to go after unlicensed financial services activity in the state, new legislation passed by the Senate and pending in the Assembly clarifies that it has such powers and provides for civil monetary penalties in addition.

•   For example, existing § 309 of the Financial Services Law permits the Superintendent to go to state court and obtain an injunction against any person that is about to or engaging in a violation of the Banking Law, Insurance Law or Financial Services Law. This provision provides for injunctive relief only.

•   Similarly, the federal Consumer Financial Protection Act (“CFPA”) provides state banking regulators with authority to bring a federal civil lawsuit for injunctive relief, restitution, and other remedies for unfair, deceptive, or abusive practices.  Unlicensed activity arguably might fall within the CFPA’s ambit.

Passed by the Senate on June 7, the new legislation, introduced by Sen. Liz Krueger, goes further by making clear that conducting activity falling within the licensing requirements of the Banking, Insurance of Financial Services Laws without a license is a violation of the Financial Services Law. The legislation ties civil monetary penalties to the penalties that could be imposed for violating each such law when conducting licensed activity.

The legislation is now pending in the Assembly. Given that the session is almost completed, its fate is uncertain.

The Senate bill and vote is here

The Assembly bill is here